GROUP ASSIGNMENT OF COMPETITIVE STRATGEY SAMPLE

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Accounting Theory and Current Issues

Executive summary

The challenging global market in today’s business world brings a lot of challenges to all businesses to compete and secure a firm position in the market. This report talks about the different strategies used by the different companies in the pharmaceutical and steel industries, under AAA theory, to get the best out of the different opportunities available in the globalized market.

Introduction

Any globalized strategy is designed to overcome the gaps and variations present in the global market. This report talks about the theory of AAA (i.e. Adaptation, Arbitration, Aggregation) that is formulated to give voice to the fine distinction between Adaptation, Aggregation, and Arbitrage. Adaptation is the way to help businesses when they aim towards increasing their revenues as well as their shares in the market with their expansion. Similarly, aggregation lets the businesses in economies of scale with the growth in their global as well as their regional functioning while remaining responsible towards their local presence (Schweizer 2005).  With Arbitrage, the businesses make the best use of currency, price as well as cost and choose the markets to move to, which will give the best revenue in selling their products.

These three strategies are useful in helping companies combat the variance in the demands in varied marketplaces. They become more confident in facing the global challenges that come their way. It also helps the companies find the best suitable markets for them to dominate in. Thus, it can be said that the AAA model is useful for all companies. However, it is also important to note that for each type of business, the three As will work differently, hence, the companies should decide on whether to apply all three As together or at a different stage of the implementation process.

This report will be focused on two industries, Pharmaceutical Industry, and Steel Industry which are growing throughout the world. The two companies that will be under the spotlight are Sun Pharmaceuticals and Pfizer Inc. in the pharmaceuticals and Tata Steel and ArcelorMittal in the steel industries (Hong, Torous, and Valkanov 2007).

The pharmaceutical and steel industries have made their presence in the global market with their continuous growth. The two industries have very well implemented the AAA model, which has ensured uninterrupted success for them.

Literature Review

Discussion

Pankaj Ghemawat has promoted the AAA model in competitive strategy which aims towards the development of a global value for the businesses.  The effective use of the three AAAs allows a business to sustain itself in the competitive market and push itself up to the top even in the super-saturated market. With the proper implementation of this strategy, businesses can create value for their products and increase their market shares as well (Ghemawat 2011).

Adaptation strategy in the Pharmaceutical industry

The new research in drugs has made the pharmaceutical industry one of the growing industries in the world. In making any new drug, there are a lot of costs involved. Any company in this industry has to go through the process of the patent, safety check, tests, effectiveness, and advertisement. It has to make sure that it is advertising itself in such a way that it reaches the right people in the country, as all the drugs are not taken by everybody, and also the laws in each country are different for medicines. Sun Pharmaceuticals and Pfizer are the best examples in the pharmaceutical industries. Sun Pharmaceuticals made itself gain a high position in this industry by abiding by the laws of different countries (Elliman and Eatock 2005). Thus, it could easily get into the market by making its drugs as per the law of the country in which it tries to get in. They even made their own chemical formulae and packaging to suit the people of specific countries. This has helped the company in an easy penetration in any new market. It has even been able to challenge patents on many products with high value in the US over the last decade and has been able to produce many cheap drugs which are the generic versions of such types of drugs. Pfizer is yet another pharmaceutical company that has implemented many new ways to make its place in Latin America. It has worked on its cultural as well as regulatory aspects along with its economic values to keep standing in the pharmaceutical market of the country. The company devoted many resources to working with many pharmacists who mainly help patients in choosing the right medicines for themselves. It even participated in many community programs to reach its potential customers (Bühring-Uhle, Kirchhoff, and Scherer 2006).

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Adaptation strategy in the Steel industry

The steel industry is one of the most challenging industries which forms the basis of the modern world. All the industries, right from the automobile industries to the pharmaceutical industries are in some way or the other linked to this industry. Thus, the steel industry is the most demanding and essential in the world. Maintaining a high position with a great quality of steel products becomes essential for the companies dealing in the manufacturing of steel as along with the normal customers big locomotive and shipbuilding companies are also their major customers. Hence, companies like Tata Steel and ArcelorMittal go through a tough time in keeping themselves in the topmost position. Tata Steel aims at being in the world’s number one position in the steel industry by providing its customers with the best quality steel and steel products. They mostly depend on the macroeconomic cycles while keeping up with the growing needs of their customers. The innovation and development of the modern world have a lot of impact on this industry (Hong, Torous, and Valkanov 2007). Hence, to cope-up with the new changes, the steel industry implements different strategies. Tata Steel has, for ages, been with the customers growing demands and has always fulfilled their requirements with great ease and still fulfills the latest market demand with the implementation of the latest market standards. ArcelorMittal is also with the new needs of the market and provides a unique experience to its customers by providing the best quality steel products. Both companies use an integrated business model, joint ventures, and flexibility while implementing the adaptation strategy to meet the growing demand of the business.

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Aggregation Strategy in Pharmaceutical Industry

The main method of aggregation used by Sun Pharma is acquisition. It acquired many renowned companies which were its competition the different countries and expanded itself. It has acquired about 19 companies and has thus increased its global presence.

When it comes to Pfizer, it designs itself to meet the different regulations in different countries, like that in Europe, after which the companies qualify to sell their product in that country.

Aggregation Strategy in Steel Industry

Tata Steel mainly follows the process of acquisitions to expand itself. It has acquired many well-known businesses like NatSteel and Millennium Steel. Along with this, the company earns revenue from its shareholdings where it is listed among the top companies with well-known shareholders throughout the world. The company uses the best plans to increase its productivity and reduce its costs. With the acquisitions, the company has a very low risk of falling and increases its demand in the new markets very easily.

ArcelorMittal itself was formed as a result of a takeover of Severstal and had become the producer of 10 percent of the world’s total steel. It mainly gets into joint ventures which expand the reach of the company in different countries and helps them get their names on the top. Thus, many companies seek the products of ArcelorMittal for the completion of their project (Ndofor, Sirmon, and He 2011).

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Arbitrage Strategy in Pharmaceutical Industry

To have a lower production cost, most of the research centers of Sun Pharma are in Asian countries as they are developing countries, and this has allowed the company to reduce the overall price of the product which allows them to provide medicines at a much cheaper rate. They also sell medicines in developed countries at a higher rate, which helps them generate more revenue for the business.

Pfizer relocates to cut taxes. The company took over UK’s pharmaceutical company AstraZeneca. By doing so, the company gained a lot, as all the UK companies do not have to pay any tax on any international earnings. Even the tax rate in the country is very low including that on the patented products. Hence, the company profits more (Elliman and Eatock 2005).

Arbitrage Strategy in Steel Industry

The steel industry relies on those arbitration strategies that prevail in that industry. Thus, the businesses’ success relies on arbitrage strategies. Thus, Tata Steel would mainly aim at selling its products to its highly valued customers at much higher prices through which it can generate more revenue for itself. Tata Steel is a name that most people throughout the world know (Ghemawat 2015). Hence, it has made many dealings with even the raw material providers so that they do not get into the insufficient supply of steel at any point in time and thus can guarantee high-quality products to its customers.

ArcelorMittal is famous for its arbitration with the State of Senegal where it entered into a contract with Senegal in which it was supposed to deposit iron ore in Senegal, including a railway line construction. However, the contract got delayed and the company failed to construct the agreed railway line. However, the company became known in the market for many.

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Synopsis

Discussion Elements Steel Industry (Tata Steel, ArcelorMittal) Pharmaceutical Industry (Sun Pharmaceuticals, Pfizer)
Adaptation

 

Tata Steel invested in such areas which helped it to regain and achieve its main business competence. ArcelorMittal’s main aim is to offer its clients the best supply of steel.

 

Sun Pharma mainly aims towards implementing such strategies related to their packaging and offering their drugs to those patients who need them. They are customer-centric and work with keeping in mind the different laws of different countries. Pfizer too sells its products with keeping in mind the different requirements of people in different countries. It even gets involved in different brand building by involving itself in the local communities.

 

Aggregation Both companies work towards exploiting the geographical, economic as well as administrative aspects.

 

The two companies use the strategy of acquiring those businesses which are proving to be challenging for them. They also make sure to meet the various regulations of each country.

 

Arbitrage The companies utilize the different requirements of the different markets including their economic as well as their governmental perspectives.

 

In many developing countries, they have structured their pricing to meet the growing needs of the customers and have thus reduced them substantially. They have different pricing structures for different countries (Ghemawat 2013).

Conclusion

This report analyses the AAA model in the context of the Pharmaceutical Industry and Steel Industry. The above analysis clearly explains the importance of AAA in these businesses. Companies should use these strategies in a balanced way as it is mainly about managing the business in a global market. Every industry is globalizing and is using the latest technology and the much-relaxed policies of trading to expand and benefit from the global world (Christensen, Grossman Hwang 2009). This report spoke about the four companies which are enabling themselves to continue their position in the new market by adapting the needs based on the Adaptation, Aggregation, and Arbitrage aspects. Thus, it may be deduced that the two industries consider consolidating their respective stake as well as position while walking towards their profit, development, and success.

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References

Bühring-Uhle, C., Kirchhoff, L. and Scherer, G., 2006. Arbitration and mediation in international business. Kluwer Law International.

Christensen, C.M., Grossman, J.H. and Hwang, J., 2009. The innovator’s prescription. A disruptive solution for health care. New York: McGraw-Hill.

Elliman, T. and Eatock, J., 2005. Online support for arbitration: designing software for a flexible business process. International journal of information technology and management4(4), pp.443-460.

Ghemawat, P., 2013. Redefining global strategy: Crossing borders in a world where differences still matter. Harvard Business Press.

Ghemawat, P., 2011. The cosmopolitan corporation. Harvard Business Review89(5), pp.92-99.

Ghemawat, P., 2015. From International Business to Intranational Business. In Emerging Economies and Multinational Enterprises (pp. 5-28). Emerald Group Publishing Limited.

Hong, H., Torous, W. and Valkanov, R., 2007. Do industries lead stock markets? Journal of Financial Economics83(2), pp.367-396.

Ndofor, H.A., Sirmon, D.G. and He, X., 2011. Firm resources, competitive actions, and performance: investigating a mediated model with evidence from the in‐vitro diagnostics industry. Strategic Management Journal32(6), pp.640-657.

Schweizer, L., 2005. Concept and evolution of business models. Journal of General Management31(2), pp.37-56.

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